Post office urged to privatize operations

WASHINGTON — The U.S. Postal Service should consider keeping door-to-door delivery while privatizing the rest of its operations, a panel led by former Government Accountability Office head David Walker found.

The Postal Service, which lost $15.9 billion last year and exhausted its $15 billion borrowing limit, should consider expanding partnerships with the private sector, a report released Thursday by a National Academy of Public Administration panel said. The post office already partners with companies including FedEx Corp. and United Parcel Service Inc.

“We do believe that this deserves serious consideration,” Walker said Thursday.

The recommendations in Thursday’s report may lay the groundwork for a new business model for the Postal Service, which plans to end Saturday mail delivery in August over objections from some members of Congress. The service, which has about 521,000 career employees, is also pushing lawmakers to relax a requirement to pay now for future retirees’ health-care costs.

The Walker-led panel analyzed a paper written last year by a former postmaster general, a former postal union leader and a former postal regulator. The first group’s work suggested divesting operations other than last-mile, door-to-door delivery by letter carriers. The Postal Service has a monopoly by law on delivering mail to boxes at homes and businesses.

The academy report recommended reviewing, with caution, the idea that the Postal Service should get out of mail sorting and transportation, leaving that to companies that can do the work more efficiently.

That would cut operating costs by more than half from $67.5 billion in the 2012 fiscal year to about $30 billion, the earlier report concluded.

Shrinking the Postal Service would require further study and would not solve all of the service’s “challenges,” the academy concluded. The panel cautioned that privatizing postal operations would “generate new challenges.”

“We agree that the current business model of the Postal Service is unsustainable,” said David Partenheimer, a spokesman. “That is why the Postal Service updated its five-year business plan last year to include expanded legislative reform proposals and actions that the Postal Service can and continues to take under existing law to reduce costs and grow revenue.”

Walker’s group questioned the earlier report’s conclusion that a private partnership model “is tested, readily available and politically feasible,” saying Congress might object. Lawmakers have pushed the service to return to profitability while standing in the way of ending Saturday mail delivery and of closing post offices or mail processing plants that serve or employ their constituents.

The public administration academy is a nonpartisan organization chartered by Congress to assist federal, state, and local governments in improving their accountability. Walker now leads the Comeback America Initiative, an independent, nonprofit policy group that promotes fiscal responsibility.

In 2001, as head of what was then called the General Accounting Office, Walker added the Postal Service to the federal government’s list of “high-risk” agencies. That was at a time mail volume was rising and the service supported itself without borrowing money, neither of which has been true in recent years.

Walker, at a congressional hearing about the list, held up his BlackBerry mobile device to tell lawmakers a shift to electronic communications endangered the Postal Service’s business model. He recalls being met by “a bunch of blank stares because they didn’t know what a BlackBerry was.”

George Gould, one of the four authors of the first paper, describes increasing the private sector’s role in postal operations as an evolution rather than wholesale change. He cites early Postal Service use of airlines to ferry mail, of trains and the growing business that delivers packages to homes for FedEx and UPS.

“The Postal Service has been an essential part of contributing to private industry in its whole existence,” Gould, who helped write the law that created the Postal Service in 1971 after it had been a cabinet-level government agency since its creation. “There’s always been a marriage between the Postal Service and private industry.”

Gould in 2006 left the National Association of Letter Carriers, where he’d been the national legislative and political director after a 27-year career at the union representing workers who deliver mail in cities.

Pitney Bowes Inc., which makes and rents postal machines, helped pay for the academy’s work. The company, based in Stamford, Conn., did $30 million worth of work for the Postal Service in the 2012 fiscal year, making it the 49th largest contractor, according to a list compiled annually by David Hendel, a lawyer at Husch Blackwell in Washington.

“By concentrating on its strength in delivery, and charging only for that service, the Postal Service will encourage increased use of commercial providers to collect, transport and sort the mail, create a private sector market for mail use, and encourage development of new products and services that can help sustain universal delivery service well into the future,” Pitney Bowes said in an emailed statement.

The service spends about $13 billion per year contracting business to private sector companies, including about $7 billion for transportation services, according to the academy report. The report didn’t estimate the market size for postal sorting operations.